Hong Kong Banking Shares Dip Amidst UBS's Takeover Of Credit Suisse

Banking shares in Hong Kong tumbled in early trade on Monday, even as the city's monetary authority said the sector had "insignificant" exposure to troubled Swiss banking giant Credit Suisse.

The city's de facto central bank moved to reassure traders Monday after turmoil last week caused by the collapse of two regional US banks and then upheaval at Switzerland's number-two lender.

Switzerland's biggest bank UBS announced Sunday it would take over Credit Suisse for $3.25 billion, following crunch talks aimed at stopping the stricken bank from triggering a wider international banking crisis.

The deal was vital to prevent irreparable economic turmoil from spreading throughout the country and beyond, the Swiss government said.

However, Hong Kong-listed banking stocks tumbled, in line with a global sell-off in the sector, on worries about lenders' exposure to risky bonds related to Credit Suisse.

"The Credit Suisse deal has left some bondholders with significant losses and investors in the region may be re-examining exposure to financial market turmoil and tail risks," said Marvin Chen, an analyst at Bloomberg Intelligence.

Market heavyweight HSBC tumbled about six percent, while Standard Chartered shed five percent and Hang Seng Bank gave up nearly two percent.

The losses dragged the Hang Seng Index down more than two percent by the break.

Earlier the Hong Kong Monetary Authority (HKMA) said that the city's banking sector was safe from any fallout.

"The total assets of Credit Suisse AG, Hong Kong Branch amounted to about HK$100 billion ($12.7 billion), representing less than 0.5 percent of the total assets of the Hong Kong banking sector," it said in a statement.

"The exposures of the local banking sector to Credit Suisse are insignificant."

The HKMA joined Washington, Frankfurt and London in welcoming the takeover as one that would support financial stability, after a week of turbulence following the collapse of two US banks.

Credit Suisse's operations in the Asian financial hub include a branch and two licensed corporations, the HKMA said.

"All of them will open for business today as usual," the statement said. "Customers can continue to access their deposits with the branch and trading services provided by Credit Suisse for Hong Kong's stock and derivatives markets."

Hong Kong's banking sector was in a healthy liquidity position, the authority said, with the average Liquidity Coverage Ratio for major institutions at 162.3 percent in Q4 2022, well above the 100 percent minimum requirement.

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